##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
  þ
    
    Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended March 31, 2009.
 or
 o
    
    Transition Report under Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to .
 Commission File No. 0-24172
 Southeastern Bank Financial Corporation
  Georgia
    
    58-2005097(State of Incorporation)
    
    (I.R.S. Employer Identification No.)
 3530 Wheeler Road, Augusta, Georgia 30909
 (Issuers telephone number, including area code)
 (Former name, former address and former fiscal year, if changed since last report)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(do not check if a smaller reporting company)
 Yes o No þ




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##### 



SOUTHEASTERN BANK FINANCIAL CORPORATION
FORM 10-Q
INDEX
 PagePart IItem 1. Financial Statements (Unaudited)Consolidated Balance Sheets as of March 31, 2009 and
December 31, 2008
    
    
    2Consolidated Statements of Income for the Three
Months ended March 31, 2009 and 2008
    
    
    3Consolidated Statements of Cash Flows for the
Three Months ended March 31, 2009 and 2008
    
    
    4Notes to Consolidated Financial Statements
    
    
    5Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations
    
    
    12Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    29Item 4. Controls and Procedures
    
    
    29Part II Other InformationItem 1. Legal Proceedings
    
    
    30
    *Item 1A. Risk Factors
    
    
    30Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    30Item 3. Defaults Upon Senior Securities
    
    
    31
    *Item 4. Submission of Matters to a Vote of Security Holders
    
    
    31
    *Item 5. Other Information
    
    
    31
    *Item 6. Exhibits
    
    
    31Signature
    
    
    32Exhibit 31.1Exhibit 31.2Exhibit 32.1
  *
    
    No information submitted under this caption.  1




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##### Table of Contents



PART I
 FINANCIAL INFORMATION
 SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARIES
 
   March 31,
    
    
    December 31,2009
    
    
    2008(Unaudited)AssetsCash and due from banks
    
    $
    33,763
    
    
    $
    24,860Federal funds sold
    
    
    61,664
    
    
    
    9,780Interest-bearing deposits in other banks
    
    
    23,949
    
    
    
    3,128Cash and cash equivalents
    
    
    119,376
    
    
    
    37,768Investment securitiesAvailable-for-sale
    
    
    300,295
    
    
    
    299,339Held-to-maturity, at cost (fair values of
$676 and $698, respectively)
    
    
    689
    
    
    
    689Loans held for sale
    
    
    20,809
    
    
    
    18,955Loans
    
    
    976,838
    
    
    
    986,831Less allowance for loan losses
    
    
    (15,186
    )
    
    
    (14,742
    )Loans, net
    
    
    961,652
    
    
    
    972,089Premises and equipment, net
    
    
    33,254
    
    
    
    33,960Accrued interest receivable
    
    
    6,343
    
    
    
    7,085Bank-owned life insurance
    
    
    17,548
    
    
    
    17,368Restricted equity securities
    
    
    6,390
    
    
    
    6,571Other real estate owned
    
    
    6,990
    
    
    
    5,734Other assets
    
    
    11,336
    
    
    
    11,481$
    1,484,682
    
    
    $
    1,411,039DepositsNoninterest-bearing
    
    $
    117,921
    
    
    $
    111,291Interest-bearing:NOW accounts
    
    
    181,130
    
    
    
    166,561Savings
    
    
    271,987
    
    
    
    247,249Money management accounts
    
    
    46,335
    
    
    
    50,404Time deposits over $100
    
    
    428,636
    
    
    
    385,439Other time deposits
    
    
    180,674
    
    
    
    178,6081,226,683
    
    
    
    1,139,552Federal funds purchased and securities sold
under repurchase agreements
    
    
    48,764
    
    
    
    62,553Advances from Federal Home Loan Bank
    
    
    84,000
    
    
    
    84,000Other borrowed funds
    
    
    900
    
    
    
    Accrued interest payable and other liabilities
    
    
    9,406
    
    
    
    10,283Subordinated debentures
    
    
    20,000
    
    
    
    20,000Total liabilities
    
    
    1,389,753
    
    
    
    1,316,388Stockholders equity:Common stock, $3.00 par value; 10,000,000 shares
authorized; 5,988,087 and 5,987,674 shares issued in
2009 and 2008, respectively; 5,987,785 and 5,987,674
shares outstanding in 2009 and 2008, respectively
    
    
    17,964
    
    
    
    17,963Preferred stock, no par value; 10,000,000 shares
authorized; 0 shares outstanding in 2009 and
2008, respectively
    
    
    
    
    
    
    Additional paid-in capital
    
    
    55,242
    
    
    
    55,189Retained earnings
    
    
    20,733
    
    
    
    21,455Treasury stock, at cost; 302 and 0 shares in
2009 and 2008, respectively
    
    
    (5
    )
    
    
    Accumulated other comprehensive income, net
    
    
    995
    
    
    
    44Total stockholders equity
    
    
    94,929
    
    
    
    94,651$
    1,484,682
    
    
    $
    1,411,039
   2




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##### Table of Contents



SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARIES
 
    Three Months EndedMarch 31,2009
    
    
    2008Interest income:Loans, including fees
    
    $
    13,805
    
    
    $
    16,393Investment securities
    
    
    4,074
    
    
    
    3,261Federal funds sold
    
    
    24
    
    
    
    91Interest-bearing deposits in other banks
    
    
    4
    
    
    
    6Total interest income
    
    
    17,907
    
    
    
    19,751Interest expense:Deposits
    
    
    6,801
    
    
    
    7,877Federal funds purchased and securities sold
under repurchase agreements
    
    
    111
    
    
    
    540Other borrowings
    
    
    896
    
    
    
    1,069Total interest expense
    
    
    7,808
    
    
    
    9,486Net interest income
    
    
    10,099
    
    
    
    10,265Provision for loan losses
    
    
    4,749
    
    
    
    1,271Net interest income after provision
for loan losses
    
    
    5,350
    
    
    
    8,994Noninterest income:Service charges and fees on deposits
    
    
    1,641
    
    
    
    1,670Gain on sales of loans
    
    
    2,237
    
    
    
    1,260Gain on sale of fixed assets
    
    
    26
    
    
    
    3Investment securities (losses) gains, net
    
    
    (164
    )
    
    
    38Retail investment income
    
    
    209
    
    
    
    289Trust service fees
    
    
    253
    
    
    
    286Increase in cash surrender value of
bank-owned life insurance
    
    
    180
    
    
    
    164Miscellaneous income
    
    
    163
    
    
    
    221Total noninterest income
    
    
    4,545
    
    
    
    3,931Noninterest expense:Salaries and other personnel expense
    
    
    5,658
    
    
    
    5,171Occupancy expenses
    
    
    1,141
    
    
    
    1,026Other operating expenses
    
    
    3,034
    
    
    
    2,724Total noninterest expense
    
    
    9,833
    
    
    
    8,921Income before income taxes
    
    
    62
    
    
    
    4,004Income tax expense
    
    
    6
    
    
    
    1,369Net income
    
    $
    56
    
    
    $
    2,635Basic net income per share
    
    $
    0.01
    
    
    $
    0.45Diluted net income per share
    
    $
    0.01
    
    
    $
    0.44Weighted average common shares outstanding
    
    
    5,987,948
    
    
    
    5,958,963Weighted average number of common and
common equivalent shares outstanding
    
    
    5,998,578
    
    
    
    6,015,301
   3




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##### Table of Contents



SOUTHEASTERN BANK FINANCIAL CORPORATION AND SUBSIDIARIES
 
    Three Months Ended March 31,2009
    
    
    2008Cash flows from operating activities:Net income
    
    $
    56
    
    
    $
    2,635Adjustments to reconcile net income to net cash
provided by operating activitiesDepreciation
    
    
    671
    
    
    
    537Deferred income tax benefit
    
    
    
    
    
    
    (393
    )Provision for loan losses
    
    
    4,749
    
    
    
    1,271Net investment securities losses (gains)
    
    
    164
    
    
    
    (38
    )Net accretion of discount on investment securities
    
    
    (161
    )
    
    
    (20
    )Increase in CSV of bank owned life insurance
    
    
    (180
    )
    
    
    (164
    )Stock options compensation cost
    
    
    47
    
    
    
    51Gain on disposal of premises and equipment
    
    
    (26
    )
    
    
    (3
    )Loss on the sale of other real estate
    
    
    112
    
    
    
    Gain on sales of loans
    
    
    (2,237
    )
    
    
    (1,260
    )Real estate loans originated for sale
    
    
    (103,376
    )
    
    
    (64,977
    )Proceeds from sales of real estate loans
    
    
    103,759
    
    
    
    57,902Decrease in accrued interest receivable
    
    
    742
    
    
    
    633Increase in other assets
    
    
    (462
    )
    
    
    (225
    )(Decrease) increase in accrued interest payable and other liabilities
    
    
    (877
    )
    
    
    871Net cash provided (used) by operating activities
    
    
    2,981
    
    
    
    (3,180
    )Cash flows from investing activities:Proceeds from sales of available for sale securities
    
    
    15,874
    
    
    
    3,950Proceeds from maturities of available for sale securities
    
    
    44,161
    
    
    
    26,583Purchase of available for sale securities
    
    
    (58,904
    )
    
    
    (38,241
    )Purchase of restricted equity securities
    
    
    (352
    )
    
    
    (755
    )Net decrease (increase) in loans
    
    
    3,078
    
    
    
    (36,623
    )Additions to premises and equipment
    
    
    (188
    )
    
    
    (1,157
    )Proceeds from sale of other real estate
    
    
    1,241
    
    
    
    Proceeds from sale of premises and equipment
    
    
    250
    
    
    
    54Net cash provided (used) in investing activities
    
    
    5,160
    
    
    
    (46,189
    )Cash flows from financing activities:Net increase in deposits
    
    
    87,131
    
    
    
    63,795Net decrease in federal funds purchased and
securities sold under repurchase agreements
    
    
    (13,789
    )
    
    
    (18,896
    )Advances from Federal Home Loan Bank
    
    
    
    
    
    
    10,000Proceeds from other borrowed funds
    
    
    900
    
    
    
    200Purchase of treasury stock
    
    
    (5
    )
    
    
    (437
    )Payment of cash dividends
    
    
    (778
    )
    
    
    (704
    )Proceeds from stock options exercised
    
    
    
    
    
    
    129Proceeds from Directors stock purchase plan
    
    
    8
    
    
    
    13Net cash provided by financing activities
    
    
    73,467
    
    
    
    54,100Net increase in cash and cash equivalents
    
    $
    81,608
    
    
    $
    4,731Cash and cash equivalents at beginning of period
    
    
    37,768
    
    
    
    25,057Cash and cash equivalents at end of period
    
    $
    119,376
    
    
    $
    29,788Supplemental disclosures of cash paid during the period for:Interest
    
    $
    8,582
    
    
    $
    10,117Income taxes
    
    $
    10
    
    
    $
    Supplemental information on noncash investing activities:Loans transferred to other real estate
    
    $
    2,609
    
    
    $
    412
   4




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5




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Level 1:
    
    Quoted prices in active markets for identical assets or liabilities.
 Level 2:
    
    Significant other observable inputs other than level 1 prices, such as quoted
market prices for similar assets or liabilities, quoted prices in markets that are not active,
and other inputs that are observable or can be corroborated by observable market data.
Observable market based inputs or unobservable inputs that are corroborated by market
data.
 Level 3:
    
    Unobservable inputs that are not corroborated by market data.
  Securities:
    6




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Impaired Loans
 Investments in tax credits:
 Assets and Liabilities Measured on a Recurring Basis
  QuotedPrices inActive
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableMarch 31,
    
    
    Assets
    
    
    Inputs
    
    
    Inputs2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(Dollars in thousands)Available-for-sale securities
    
    $
    300,295
    
    
    $
    24
    
    
    $
    288,990
    
    
    $
    11,281Tax credits
    
    
    494
    
    
    
    
    
    
    
    
    
    
    
    494Held-to-maturity securities
    
    
    676
    
    
    
    
    
    
    
    676
    
    
    
    Total
    
    $
    301,465
    
    
    $
    24
    
    
    $
    289,666
    
    
    $
    11,775
 QuotedPrices inActive
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableDecember 31,
    
    
    Assets
    
    
    Inputs
    
    
    Inputs2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(Dollars in thousands)Available-for-sale securities
    
    $
    299,339
    
    
    $
    46
    
    
    $
    295,163
    
    
    $
    4,130Tax credits
    
    
    515
    
    
    
    
    
    
    
    
    
    
    
    515Held-to-maturity securities
    
    
    698
    
    
    
    
    
    
    
    698
    
    
    
    Total
    
    $
    300,552
    
    
    $
    46
    
    
    $
    295,861
    
    
    $
    4,645
  7




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##### Table of Contents



Available-for-saleTax credits
    
    
    Securities
    
    
    TotalBeginning balance, January 1, 2009
    
    $
    515
    
    
    $
    4,130
    
    
    $
    4,645Total gains or losses (realized/unrealized)Included in earningsAmortization of tax credit investment
    
    
    (21
    )
    
    
    
    
    
    
    (21
    )Included in other comprehensive income
    
    
    
    
    
    
    1,007
    
    
    
    1,007Transfers in and/or out of Level 3
    
    
    
    
    
    
    6,144
    
    
    
    6,144Ending balance, M arch 31, 2009
    
    $
    494
    
    
    $
    11,281
    
    
    $
    11,775
 
 Available-for-saleTax credits
    
    
    Securities
    
    
    TotalBeginning balance, January 1, 2008
    
    $
    594
    
    
    $
    
    
    
    $
    594Total gains or losses (realized/unrealized)Included in earningsAmortization of tax credit investment
    
    
    (20
    )
    
    
    
    
    
    
    (20
    )Included in other comprehensive income
    
    
    
    
    
    
    
    
    
    
    Transfers in and/or out of Level 3
    
    
    
    
    
    
    
    
    
    
    Ending balance, March 31, 2008
    
    $
    574
    
    
    $
    
    
    
    $
    574
 Assets and Liabilities Measured on a Non-Recurring Basis
  QuotedPrices inActive
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableMarch 31,
    
    
    Assets
    
    
    Inputs
    
    
    Inputs2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:Imp aired loans
    
    $
    19,566
    
    
    
    
    
    
    
    
    
    
    $
    19,566Other real estate owned
    
    
    6,990
    
    
    
    
    
    
    
    
    
    
    
    6,990
  8




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QuotedPrices inActive
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableDecember 31,
    
    
    Assets
    
    
    Inputs
    
    
    Inputs2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:Impaired loans
    
    $
    14,743
    
    
    
    
    
    
    
    
    
    
    $
    14,743Other real estate owned
    
    
    5,734
    
    
    
    
    
    
    
    
    
    
    
    5,734
    Recognition and
Presentation of Other-Than-Temporary Impairments,
 Determining Fair Value When the
Volume and Level of Activity for the Asset and Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly
  9




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Interim Disclosures
about Fair Value of Financial Instruments Disclosures
about Fair Value of Financial Instruments
        10




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11




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Item 2.
   Managements Discussion and Analysis of Financial Condition and
Results of Operations
  Overview
     12




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##### Table of Contents



Table 1  Selected Financial Data
 March 31,
    
    
    December 31,
    
    
    December 31,2009
    
    
    2008
    
    
    2004(Dollars in thousands)Assets
    
    $
    1,484,682
    
    
    $
    1,411,039
    
    
    $
    706,517Loans
    
    
    997,647
    
    
    
    1,005,786
    
    
    
    494,170Deposits
    
    
    1,226,683
    
    
    
    1,139,552
    
    
    
    556,785Annualized return on average total assets
    
    
    0.02
    %
    
    
    0.57
    %
    
    
    1.29
    %Annualized return on average equity
    
    
    0.24
    %
    
    
    8.48
    %
    
    
    15.50
    %
   13




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Forward-Looking Statements
   14




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##### Table of Contents



Critical Accounting Estimates
      15




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##### Table of Contents



Performance Overview
   Table 2  Selected Balance Sheet Data
 March 31,
    
    
    December 31,
    
    
    Variance2009
    
    
    2008
    
    
    Amount
    
    
    %(Dollars in thousands)Cash, due from banks
and interest-bearing deposits
    
    $
    57,712
    
    
    $
    27,988
    
    
    $
    29,724
    
    
    
    106.2
    %Federal funds sold
    
    
    61,664
    
    
    
    9,780
    
    
    
    51,884
    
    
    
    530.5
    %Investment securities
    
    
    300,984
    
    
    
    300,028
    
    
    
    956
    
    
    
    0.3
    %Loans
    
    
    997,647
    
    
    
    1,005,786
    
    
    
    (8,139
    )
    
    
    (0.8
    %)Assets
    
    
    1,484,682
    
    
    
    1,411,039
    
    
    
    73,643
    
    
    
    5.2
    %Deposits
    
    
    1,226,683
    
    
    
    1,139,552
    
    
    
    87,131
    
    
    
    7.6
    %Securities sold under repurchase agreements
    
    
    48,764
    
    
    
    62,553
    
    
    
    (13,789
    )
    
    
    (22.0
    %)Advances from Federal Home Loan Bank
    
    
    84,000
    
    
    
    84,000
    
    
    
    0
    
    
    
    0.0
    %Liabilities
    
    
    1,389,753
    
    
    
    1,316,388
    
    
    
    73,365
    
    
    
    5.6
    %Stockholders equity
    
    
    94,929
    
    
    
    94,651
    
    
    
    278
    
    
    
    0.3
    %
  16




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Net Interest Income
   17




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##### Table of Contents



Table 3  Average Balances, Income and Expenses, Yields and Rates
 Three Months Ended March 31, 2009
    
    
    Three Months Ended March 31, 2008Annualized
    
    
    
    
    
    
    
    
    
    
    AnnualizedAverage
    
    
    Amount
    
    
    
    
    
    
    Average
    
    
    AmountAverage
    
    
    Yield or
    
    
    Paid or
    
    
    Average
    
    
    Yield or
    
    
    Paid orAmount
    
    
    Rate
    
    
    Earned
    
    
    Amount
    
    
    Rate
    
    
    Earned(Dollars in thousands)Interest-earning assets:Loans
    
    $
    1,000,570
    
    
    
    5.54
    %
    
    $
    13,805
    
    
    $
    896,500
    
    
    
    7.26
    %
    
    $
    16,393Investment securities
    
    
    295,419
    
    
    
    5.52
    %
    
    
    4,074
    
    
    
    248,618
    
    
    
    5.25
    %
    
    
    3,261Federal funds sold
    
    
    55,401
    
    
    
    0.18
    %
    
    
    24
    
    
    
    14,977
    
    
    
    2.43
    %
    
    
    91Interest-bearing deposits in other banks
    
    
    6,029
    
    
    
    0.27
    %
    
    
    4
    
    
    
    500
    
    
    
    4.60
    %
    
    
    6Total interest-earning assets
    
    $
    1,357,419
    
    
    
    5.29
    %
    
    $
    17,907
    
    
    $
    1,160,595
    
    
    
    6.77
    %
    
    $
    19,751Interest-bearing liabilities:Deposits
    
    $
    1,077,012
    
    
    
    2.56
    %
    
    $
    6,801
    
    
    $
    874,421
    
    
    
    3.61
    %
    
    $
    7,877Federal funds purchased / securities
sold under repurchase agreements
    
    
    55,476
    
    
    
    0.81
    %
    
    
    111
    
    
    
    64,306
    
    
    
    3.37
    %
    
    
    540Other borrowings
    
    
    104,547
    
    
    
    3.48
    %
    
    
    896
    
    
    
    86,511
    
    
    
    4.96
    %
    
    
    1,069Total interest-bearing liabilities
    
    $
    1,237,035
    
    
    
    2.56
    %
    
    $
    7,808
    
    
    $
    1,025,238
    
    
    
    3.71
    %
    
    $
    9,486Net interest margin/income:
    
    
    
    
    
    
    2.96
    %
    
    $
    10,099
    
    
    
    
    
    
    
    3.49
    %
    
    $
    10,265
    18




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##### Table of Contents



Noninterest Income
 Table 4  Noninterest Income
 Three Months EndedMarch 31,
    
    
    Variance2009
    
    
    2008
    
    
    Amount
    
    
    %(Dollars in thousands)Service charges and fees
on deposits
    
    $
    1,641
    
    
    $
    1,670
    
    
    $
    (29
    )
    
    
    (1.7
    %)Gain on sales of loans
    
    
    2,237
    
    
    
    1,260
    
    
    
    977
    
    
    
    77.5
    %Gain on sale of fixed assets
    
    
    26
    
    
    
    3
    
    
    
    23
    
    
    
    766.7
    %Investment securities
(losses) gains, net
    
    
    (164
    )
    
    
    38
    
    
    
    (202
    )
    
    
    (531.6
    %)Retail investment income
    
    
    209
    
    
    
    289
    
    
    
    (80
    )
    
    
    (27.7
    %)Trust services fees
    
    
    253
    
    
    
    286
    
    
    
    (33
    )
    
    
    (11.5
    %)Increase in cash surrender
value of bank-owned
life insurance
    
    
    180
    
    
    
    164
    
    
    
    16
    
    
    
    9.8
    %Miscellaneous income
    
    
    163
    
    
    
    221
    
    
    
    (58
    )
    
    
    (26.2
    %)Total noninterest income
    
    $
    4,545
    
    
    $
    3,931
    
    
    $
    614
    
    
    
    15.6
    %
   19




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##### Table of Contents



Noninterest Expense
 Table 5  Noninterest Expense
 Three Months EndedMarch 31,
    
    
    Variance2009
    
    
    2008
    
    
    Amount
    
    
    %(Dollars in thousands)Salaries and other
personnel expense
    
    $
    5,658
    
    
    $
    5,171
    
    
    $
    487
    
    
    
    9.4
    %Occupancy expenses
    
    
    1,141
    
    
    
    1,026
    
    
    
    115
    
    
    
    11.2
    %Other operating expenses
    
    
    3,034
    
    
    
    2,724
    
    
    
    310
    
    
    
    11.4
    %Total noninterest expense
    
    $
    9,833
    
    
    $
    8,921
    
    
    $
    912
    
    
    
    10.2
    %
  Salaries and other personnel expenses:
  Occupancy expenses:
  Other operating expenses:
  Income Taxes
   20




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Asset Quality
    21




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##### Table of Contents



March 31,
    
    
    December 31,(Dollars in thousands)
    
    2009
    
    
    2008Acquisition Development and Construction Loans
    
    
    344,821
    
    
    
    355,943CSRA  primary market areaPeriod-end loans
    
    
    262,749
    
    
    
    266,156FAS 114 Impaired loans
    
    
    621
    
    
    
    5,187Classified/watch rated loans
    
    
    19,258
    
    
    
    9,879Charge-offs % (annual)
    
    
    0.05
    %
    
    
    0.19
    %FAS 114 allowance / Impaired loans
    
    
    0.00
    %
    
    
    0.00
    %FAS 5 Allowance / Loans not impaired %
    
    
    0.90
    %
    
    
    0.67
    %Allowance / Charge-offs
    
    
    24.67
    
    
    
    4.78Savannah, GeorgiaPeriod-end loans
    
    
    25,666
    
    
    
    28,300FAS 114 Impaired loans
    
    
    5,257
    
    
    
    2,645Classified/watch rated loans
    
    
    6,365
    
    
    
    5,060Charge-offs % (annual)
    
    
    2.82
    %
    
    
    3.18
    %FAS 114 allowance / Impaired loans
    
    
    13.98
    %
    
    
    6.62
    %FAS 5 Allowance / Loans not impaired %
    
    
    7.42
    %
    
    
    4.20
    %Allowance / Charge-offs
    
    
    2.91
    
    
    
    1.39Athens, GeorgiaPeriod-end loans
    
    
    29,317
    
    
    
    31,806FAS 114 Impaired loans
    
    
    15,584
    
    
    
    8,772Classified/watch rated loans
    
    
    2,280
    
    
    
    13,667Charge-offs % (annual)
    
    
    16.54
    %
    
    
    1.78
    %FAS 114 allowance / Impaired loans
    
    
    8.53
    %
    
    
    12.04
    %FAS 5 Allowance / Loans not impaired %
    
    
    10.57
    %
    
    
    3.97
    %Allowance / Charge-offs
    
    
    0.57
    
    
    
    2.55ADC Participations  GeorgiaPeriod-end loans
    
    
    19,294
    
    
    
    21,676FAS 114 Impaired loans
    
    
    12,794
    
    
    
    10,637Classified/watch rated loans
    
    
    
    
    
    
    48Charge-offs % (annual)
    
    
    40.66
    %
    
    
    8.88
    %FAS 114 allowance / Impaired loans
    
    
    2.27
    %
    
    
    4.09
    %FAS 5 Allowance / Loans not impaired %
    
    
    1.51
    %
    
    
    9.55
    %Allowance / Charge-offs
    
    
    0.05
    
    
    
    0.77ADC Participations  FloridaPeriod-end loans
    
    
    7,795
    
    
    
    8,005FAS 114 Impaired loans
    
    
    3,236
    
    
    
    3,650Classified/watch rated loans
    
    
    704
    
    
    
    704Charge-offs % (annual)
    
    
    21.24
    %
    
    
    0.19
    %FAS 114 allowance / Impaired loans
    
    
    0.00
    %
    
    
    11.34
    %FAS 5 Allowance / Loans not impaired %
    
    
    3.11
    %
    
    
    4.27
    %Allowance / Charge-offs
    
    
    0.09
    
    
    
    2.00Total ADC Impaired Loans
    
    
    37,492
    
    
    
    30,891Total ADC Classified/Watch Loans
    
    
    28,607
    
    
    
    29,358
   22




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##### Table of Contents



Table 6  Non-Performing Assets
(Dollars in thousands)
 March 31, 2009
    
    
    December 31, 2008Nonaccrual loans
    
    $
    45,880
    
    
    $
    34,781Other real estate owned
    
    
    6,990
    
    
    
    5,734Total non-performing assets
    
    $
    52,870
    
    
    $
    40,515Loans past due 90 days or more
and still accruing interest
    
    $
    
    
    
    $
    7,298Non-performing assets to total assets
    
    
    3.56
    %
    
    
    2.87
    %Non-performing assets to total loans and ORE
    
    
    5.26
    %
    
    
    4.01
    %Allowance for loan loss to total non-performing assets
    
    
    28.72
    %
    
    
    36.39
    %
 Allowance for Loan Losses
    23




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##### Table of Contents



Table 7  Loan Portfolio Composition
 March 31, 2009
    
    
    December 31, 2008Amount
    
    
    %
    
    
    Amount
    
    
    %(Dollars in thousands)Commercial financial and
agricultural
    
    $
    100,011
    
    
    
    10.02
    %
    
    $
    109,751
    
    
    
    10.91
    %Real estateCommercial
    
    
    273,578
    
    
    
    27.42
    %
    
    
    266,362
    
    
    
    26.49
    %Residential
    
    
    214,283
    
    
    
    21.48
    %
    
    
    212,856
    
    
    
    21.16
    %Residential held for sale
    
    
    20,809
    
    
    
    2.09
    %
    
    
    18,955
    
    
    
    1.88
    %Construction and
development
    
    
    356,815
    
    
    
    35.77
    %
    
    
    369,731
    
    
    
    36.76
    %Total real estate
    
    
    865,485
    
    
    
    86.75
    %
    
    
    867,904
    
    
    
    86.29
    %Lease financing
    
    
    0
    
    
    
    0.00
    %
    
    
    33
    
    
    
    0.00
    %ConsumerDirect
    
    
    25,184
    
    
    
    2.52
    %
    
    
    24,272
    
    
    
    2.41
    %Indirect
    
    
    3,075
    
    
    
    0.31
    %
    
    
    3,319
    
    
    
    0.33
    %Revolving
    
    
    4,214
    
    
    
    0.42
    %
    
    
    905
    
    
    
    0.09
    %Total consumer
    
    
    32,473
    
    
    
    3.25
    %
    
    
    28,496
    
    
    
    2.83
    %Deferred loan origination fees
    
    
    (322
    )
    
    
    -0.03
    %
    
    
    (398
    )
    
    
    -0.03
    %Total
    
    $
    997,647
    
    
    
    100.00
    %
    
    $
    1,005,786
    
    
    
    100.00
    %
    24




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##### Table of Contents



Table 8  Allowance for Loan Losses
(Dollars in thousands)
 2009
    
    
    2008Beginning balance, January 1
    
    $
    14,742
    
    
    $
    11,800Provision charged to expense
    
    
    4,749
    
    
    
    1,271Recoveries
    
    
    161
    
    
    
    204Loans charged off
    
    
    (4,466
    )
    
    
    (467
    )Ending balance, March 31
    
    $
    15,186
    
    
    $
    12,808Allowance for loan loss to total loans
    
    
    1.52
    %
    
    
    1.38
    %
   25




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##### Table of Contents



Liquidity and Capital Resources
    26




---



##### Table of Contents



Table 9  Regulatory Capital Requirements
March 31, 2009
 (Dollars in Thousands)
 Required for capitalActual
    
    
    adequacy purposes
    
    
    ExcessAmount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentSoutheastern Bank Financial
CorporationRisk-based capital:Tier 1 capital
    
    $
    113,804
    
    
    
    10.34
    %
    
    
    44,005
    
    
    
    4.00
    %
    
    
    69,799
    
    
    
    6.34
    %Total capital
    
    
    127,573
    
    
    
    11.60
    %
    
    
    88,010
    
    
    
    8.00
    %
    
    
    39,563
    
    
    
    3.60
    %Tier 1 leverage ratio
    
    
    113,804
    
    
    
    7.84
    %
    
    
    58,080
    
    
    
    4.00
    %
    
    
    55,724
    
    
    
    3.84
    %Georgia Bank & Trust CompanyRisk-based capital:Tier 1 capital
    
    $
    95,742
    
    
    
    9.79
    %
    
    
    39,109
    
    
    
    4.00
    %
    
    
    56,633
    
    
    
    5.79
    %Total capital
    
    
    107,979
    
    
    
    11.04
    %
    
    
    78,218
    
    
    
    8.00
    %
    
    
    29,761
    
    
    
    3.04
    %Tier 1 leverage ratio
    
    
    95,742
    
    
    
    7.32
    %
    
    
    58,863
    
    
    
    4.50
    %
    
    
    36,879
    
    
    
    2.82
    %Southern Bank & TrustRisk-based capital:Tier 1 capital
    
    $
    13,953
    
    
    
    11.43
    %
    
    
    4,885
    
    
    
    4.00
    %
    
    
    9,068
    
    
    
    7.43
    %Total capital
    
    
    15,482
    
    
    
    12.68
    %
    
    
    9,769
    
    
    
    8.00
    %
    
    
    5,713
    
    
    
    4.68
    %Tier 1 leverage ratio
    
    
    13,953
    
    
    
    9.34
    %
    
    
    5,975
    
    
    
    4.00
    %
    
    
    7,978
    
    
    
    5.34
    %
   Commitments and Contractual Obligations
   27




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##### Table of Contents



Table 10  Commitments and Contractual Obligations
 Less than
    
    
    1  3
    
    
    3  5
    
    
    More than($ in thousands)
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    5 YearsLines of credit
    
    $
    209,423
    
    
    
    
    
    
    
    
    
    
    
    Lease agreements
    
    
    364
    
    
    
    594
    
    
    
    159
    
    
    
    87Deposits
    
    
    1,101,820
    
    
    
    117,305
    
    
    
    7,403
    
    
    
    155Securities sold under
repurchase agreements
    
    
    48,764
    
    
    
    
    
    
    
    
    
    
    
    FHLB advances
    
    
    27,000
    
    
    
    32,000
    
    
    
    
    
    
    
    25,000Other borrowings
    
    
    900
    
    
    
    
    
    
    
    
    
    
    
    Total commitments and
contractual obligations
    
    $
    1,388,271
    
    
    $
    149,899
    
    
    $
    7,562
    
    
    $
    25,242
  Effects of Inflation and Changing Prices
   28




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
   29




---



##### Table of Contents



Part II
OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 Issuer Purchases of Equity Securities
  Total Number of
    
    
    Maximum Number (orShares (or Units)
    
    
    Appropriate Dollar Value ) ofTotal Number
    
    
    Average
    
    
    Purchased as Part of
    
    
    Shares (or Units) Yet To Beof Shares
    
    
    Price Paid
    
    
    Publicly Announced
    
    
    Purchased Under the PlansPeriod
    
    Purchased
    
    
    Per Share
    
    
    Plans or Programs
    
    
    or ProgramsJanuary 1 through
January 31, 2009
    
    
    
    
    
    
    
    
    
    
    25,831
    
    
    
    74,169February 1 through
February 28, 2009
    
    
    302
    
    
    
    16.00
    
    
    
    26,133
    
    
    
    73,867March 1 through
March 31, 2009
    
    
    
    
    
    
    
    
    
    
    26,133
    
    
    
    73,867Total
    
    
    302
    
    
    $
    16.00
    
    
    
    26,133
    
    
    
    73,867
   30




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##### Table of Contents



Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
 31.1
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.31.2
    
    Certification of Chief Financial Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
  31




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##### Table of Contents



SOUTHEASTERN BANK FINANCIAL CORPORATIONDate:      May 11, 2009
    By:
    /s/ Darrell R. RainsDarrell R. RainsGroup Vice President, Chief
Financial Officer 
(Duly Authorized
Officer of 
Registrant and Principal
Financial Officer)  32




---



##### Table of Contents



ExhibitNo.
    
    Description31.1
    
    Certification of Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
  33